Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
FTA revision fails to reassure carmakers
Vehicles are lined up for export at the Port of Pyeongtaek in Gyeonggi Province in this file photo. / Korea Times file
By Park Jae-hyuk
By Park Jae-hyuk
Korean carmakers are still facing uncertainties about their exports to the United States even after the signing of the revised Korea-U.S. free trade agreement (KORUS FTA) by President Moon Jae-in and President Donald Trump, industry officials said Wednesday.
“The U.S. is still able to impose high tariffs on imported cars, based on Section 232 of the Trade Expansion Act, so the government should make every effort for to ensure Korean vehicles are exempt from auto tariffs,” the Korea International Trade Association said in a statement.
Section 232 allows Trump to impose unlimited tariffs or create other trade barriers at his discretion if he believes they are needed so that “imports will not threaten to impair national security,” which is expansively defined in the section. Trump has threatened to impose a 25 percent tariff on all cars exported to the U.S.
Moon therefore requested Trump to exempt Korea from heavy tariffs on auto imports, during the Korea-U.S. summit in New York on the day of the signing ceremony. Moon cited Korea's declining trade surplus with the U.S. and Americans working for Korean carmakers having factories in the U.S. as reasons for his request, according to presidential spokesman Kim Eui-kyeom.
The U.S. president reportedly ordered his subordinates to review Moon's request.
However, the review of the request does not guarantee the exemption, so Washington can still rely on auto tariffs as its bargaining chip to have an advantage on Seoul.
Against this backdrop, Trade Minister Kim Hyun-jong, who agreed to the revised KORUS FTA, vowed to make every effort for carmakers to be exempted from tariffs.
“Some people wanted the government to get rid of uncertainties about Section 232, before signing the revised KORUS FTA,” he said. “However, we prioritized the revision to the KORUS FTA to secure stability, amid the growing expectations of changes in North Korea's relationships with South Korea and the U.S.”
Most domestic automakers are taking a wait-and-see attitude, but Hyundai Motor Group is aggressively moving to get a definite answer from the U.S. authorities.
Chung Eui-sun, executive vice chairman of the automotive group, went on a weeklong trip to the U.S. starting Sept. 16 to meet U.S. Secretary of Commerce Wilbur Ross, U.S. Trade Representative Robert Lighthizer and U.S. Senator from Georgia Johnny Isakson to discuss tariffs on imported cars. He declined to join Moon's three-day summit in North Korea because of the trip.
According to Hana Institute of Finance, the 25 percent tariff on cars will raise export prices of Korean vehicles by up to 12 percent, so domestic automakers will collectively suffer a 2.8 trillion won loss.
Lee Hang-gu, a researcher at the Korea Institute for Industrial Economics and Trade, said the U.S. may set a yearly import quota on Korean vehicles instead of imposing tariffs. Import quotas are limitations on the quantity of products that can be imported into a country during a specified period of time.